CFOs: With Great Power Comes Great Responsibility—And Opportunity.
Eric joins us as a guest blogger, reflecting on his time spent as a CFO. He has served in an executive capacity in numerous industry leading companies.
If you’re a CFO or a controller, you don’t often get to be the hero. Sometimes, you’re tasked with fun projects such as finding capital and deploying it on activities that will increase the long-term value of the business. But most days involve a lot of situations where you are the one to say “no”—all for the sake of the greater good. “With great power comes great responsibility,” as they say.
In my 15 years as a CFO working for a range of technology companies, I understand how those who hold the purse strings can often feel like a Clark Kent—an average, mild-mannered guy trying to help your company get through the day to day. It would be easy to presume such a position offers relatively few opportunities for glory, for stepping in and being the hero.
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For example, companies typically light a signal in the sky for their CMO or VP of Sales when looking for someone to increase revenue to save the day. That’s a smart play—by the very nature of their job responsibilities, CMOs and sales execs spend money in order to generate new revenue.
But real life is never as black & white as the comics or movies, and the hero isn’t always who you expect. There are times when the opportunities arise for even a mild-mannered CFO or an unassuming controller to be the organization’s masked vigilante of profitability where others fall short. In fact, a CFO or controller has a unique superpower that can have a staggering impact on bottom lines: the ability to reduce expenses.
Often when people think about sources of capital, they often think externally—raising equity or using bank debt—but often, the best, cheapest, most painless, and most overlooked form of capital comes from within the business. By eliminating inefficiencies, a CFO or controller can reduce a company’s non-strategic spend and re-deploy the funds towards activities that drive revenue. It’s all about cutting the fat, not the muscle.
Consider this: When I joined a $200M software company, we quickly discovered we were underspending on product development. Whereas the industry standard was for 16-17 percent of revenue spent on product research and development, our company was only spending 14-15 percent. That 2-3 percent may not sound like much, but it amounted to millions of dollars. At the same time, we discovered we were overspending on customer support relative to our competitors. Over time, we found ways to spend less on customer support without sacrificing customer satisfaction. We were then able to redistribute those savings into product development.
Another way many companies do this is by assessing their parcel shipping spend. It’s not uncommon for even the best carriers to have late deliveries, overcharges, and other factors —and every one of those are opportunities for a CFO or controllers to recover money the organization is owed. Unfortunately, many companies don’t have the know-how, staff, data, or capabilities to consistently hold carriers accountable and request the applicable refunds.
Worse yet, some companies are still bound to outdated contracts that rarely reflect the best interests of their business, even though these contracts can be renegotiated at any time with only a month’s notice! That’s why it makes so much sense to look at the shipping spend—it’s an easy opportunity that doesn’t cost money when you find the right partner.
By eliminating inefficiencies, a CFO or controller can reduce a company’s non-strategic spend and re-deploy the funds towards activities that drive revenue.
The value proposition for shippers is the same: deliver on-time for a reasonable fee. And yet the odds are likely that you’re missing opportunities to hold your carrier accountable to the terms of your contract. The odds are equally likely that your contract could stand to be benchmarked against others in the industry and then renegotiated accordingly.
This is found money sitting in your current budget. It’s an opportunity to free up capital using money you’re already spending. It’s also a chance for controllers and CFOs to go from Clark Kent to Superman—to be that hero the organization needs.
Take a good hard look at your shipping budget, and you too may be able to generate capital for your company and reinvest it to generate real revenue. In other words, you can finally be able to transform from mild-mannered staffer to save-the-day hero in a single bound (no spandex required).